MarketWatch.com - Pre-Market Indications

Tuesday, June 1, 2010

Indications: U.S. futures slump on China, Europe, BP fears

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By Steve Goldstein, MarketWatch

LONDON (MarketWatch) -- U.S. stock futures slumped Tuesday as a hurricane of worries swept through the market, including BP's failed oil-spill response, the nearly-collapsed $35.5 billion sale of American International Group's Asian arm, slowing Chinese demand and concerns over the health of Europe's banks.

S&P 500 futures fell 16 points to 1,072.50 and Nasdaq 100 futures fell 22.25 points to 1,829.70. Futures on the Dow Jones Industrial Average dropped 124 points.

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U.S. blue chips suffered through the worst May since 1962, with the Dow Jones Industrial Average retreating 7.9%. Other major indexes also suffered through May, with the S&P 500 careening 8.2% and the Nasdaq Composite falling 8.3%.

Worries over European bank health -- which were reignited Friday when Fitch Ratings became the second agency to remove Triple-A status from Spain -- were back as the European Central Bank said late Monday that euro-zone banks face 195 billion euros ($239 billion) of write-downs this year and next.

The euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2129, -0.0175, -1.4223%) fell to a four-year low, trading around $1.2115 in European action.

Two gauges of Chinese manufacturing both showed slowing growth.

The equivalent U.S. measurement, the Institute for Supply Management's May manufacturing index, is due for release at 10 a.m. Eastern time.

"We believe that markets could remain choppy for the next few weeks until the growth debate is settled," said David Shairp, a strategist at J.P. Morgan Asset Management.

"The investment choice is very clear but also very treacherous."

Also in the spotlight was BP /quotes/comstock/13*!bp/quotes/nls/bp (BP 42.95, -2.43, -5.35%) , whose market cap slumped by roughly $15 billion after its so-called "top-kill" operation aimed at ending the worst oil spill in U.S. history failed. See full story.

Prudential plc /quotes/comstock/13*!puk/quotes/nls/puk (PUK 15.61, -0.45, -2.80%) rose in London action as American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 35.38, -1.08, -2.96%) refused to accept the U.K. insurer's lower, $30 billion offer for AIG's AIA arm. AIG initially accepted a $35.5 billion offer from Prudential. See AIG story.

Ryanair /quotes/comstock/15*!ryaa.y/quotes/nls/ryaay (RYAAY 23.54, -0.26, -1.09%) climbed in Dublin as the no-frills carrier paid its first dividend as a public company.

Overseas, the Nikkei 225 slipped 0.6% in Tokyo, while the European losses were more steep, with the Stoxx Europe 600 retreating 1.8% in late morning trade.

Oil futures fell by more than $2 a barrel, while gold futures rose by about $7 an ounce.

Investors were also turning to bonds, with yields on 10-year Treasury bonds falling 7 basis points to 3.23%.

Steve Goldstein is MarketWatch's London bureau chief.


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